Morgan Stanley: The European Central Bank has further room for interest rate cuts, and the German bond yield may be 2.45% by the end of next year.

Jin10 reports that Morgan Stanley expects the European Central Bank to further lower interest rates in the first half of next year. By mid-next year, the policy rate is expected to be reduced from the current 2.00% to 1.50% and remain at that level. Strategists pointed out: “Weak economic growth, inflation below expectations, coupled with limited fiscal stimulus, are all pushing the European Central Bank towards further easing.” Against this backdrop, Morgan Stanley expects the 10-year German bond yield to be around 2.45% by the end of 2026. According to LSEG data, the money market anticipates the European Central Bank will cut rates by nearly 10 basis points in June 2026.